El Salvador continues to be a magnet for foreign investments, owing to its favorable business environment and enhanced security conditions. These factors have led to a substantial influx of Foreign Direct Investment (FDI), with an impressive total of $142 million recorded in the first quarter of 2023, as stated by Douglas Rodríguez, the President of the Central Reserve Bank (BCR).
“The improved security has unlocked opportunities that El Salvador hasn’t seen for decades, such as Foreign Direct Investment which had been below average for years. […] In this first quarter of 2023, FDI reached $142 million, signifying external funds that are being injected directly into the economy,” the official recently stated in a televised interview.
According to Rodríguez, FDI is a crucial component of the country’s economic development, as it has been proven to contribute to job creation, international trade stimulation, value addition, and technology transfer within the nation.
Furthermore, this surge in foreign investment demonstrates a growing interest from entrepreneurs to allocate more capital into the country’s economy.
“Opposition claims that security drives businesses away, that foreign investors are reluctant to invest in El Salvador due to security concerns; however, this is entirely contradictory. On the contrary, foreign investors are looking towards the country because it offers opportunities with security for investment,” Rodríguez reiterated.
The head of the BCR also highlighted the sectors that have witnessed the most significant growth, including profit reinvestment, debt instruments, and capital contributions. “This indicates an influx of additional capital, with profits being reinvested to expand businesses, thanks to the improving security and business climate,” he added.
In alignment with these observations, statistics from the state-owned bank indicate that the sectors displaying positive data include industry, with a total investment of $88.9 million; commerce, with $80.3 million; electricity, with $22.6 million; and transportation, with an investment of $2.5 million during the first quarter of 2023.
Rodríguez further emphasized that the principal investments originated from Mexico, contributing $65.7 million; Spain, with $52.4 million; Switzerland, providing $12.3 million; Nicaragua, investing $8.7 million; Cayman Islands, contributing $7.9 million; Netherlands, with $7.6 million; and Costa Rica with $6.3 million, among other countries.
Rodríguez also forecasted that these investments are expected to continue throughout the year due to the prevailing security conditions, which have become the primary driver of the economy’s dynamism. Additionally, tourism, particularly international tourism, has contributed significantly, bringing around $80 million in foreign exchange during the August holiday season alone.
Economic Boost Expected by Year-End
On a separate note, the BCR president reaffirmed that the country’s growth remains positive, even considering international factors, and projected a year-end growth between 2% and 3%.
“We have very promising prospects; the country is progressing thanks to the policies and strategies implemented by President Bukele,” he concluded.
El Salvador’s steady economic growth, buoyed by a supportive business climate and enhanced security measures, has attracted substantial foreign investments in various sectors. This influx of Foreign Direct Investment bodes well for the nation’s economic advancement and promises a positive outlook for the foreseeable future.